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Obama Budget Strengthens Medicaid and CHIP

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The President’s budget includes sound improvements to Medicaid and the Children’s Health Insurance Program (CHIP), including:

Three years of full federal financing for all Medicaid expansion states. The President proposes to have the federal government pay the entire cost of health reform’s Medicaid expansion for the first three years — whether states have already expanded or will in the future. Under current law, the federal government covers 100 percent of expansion costs between 2014 and 2016 and at least 90 percent thereafter, so states expanding after January 1, 2014 get less than three years of 100-percent federal funding — and states expanding next year or later won’t get any. The President’s proposal would treat all states equitably.

CHIP funding extension through 2019. CHIP is a critical source of affordable coverage for children from low- and moderate-income families with incomes too high for regular Medicaid. The President and Congress last year extended federal CHIP funding through 2017, allowing states to sustain coverage for the roughly 8 million children who rely on it. If policymakers don’t continue CHIP funding, more than 1 million children now on CHIP could end up uninsured, a previous estimate by the Medicaid and CHIP Payment and Access Commission suggests.

Equitable Medicaid funding for Puerto Rico. Federal Medicaid funding to Puerto Rico and the other territories is capped, so the federal government picks up a dramatically smaller share of Medicaid costs in Puerto Rico than in the states — just 15-20 percent, compared with an average of 57 percent for the states. If Medicaid funding rules treated Puerto Rico like a state, the federal government would cover 83 percent of the island’s Medicaid costs. This shortfall is a major cause of Puerto Rico’s budget troubles. Although health reform provided a one-time boost in federal Medicaid funding, Puerto Rico is expected to exhaust those funds as early as next year. The President’s budget would treat Puerto Rico and the other territories like states by eliminating the funding cap and eventually setting their federal Medicaid matching rates in the same way as for states. (The budget would also raise minimum Medicaid eligibility levels in the territories.) These proposals would help address Puerto Rico’s serious fiscal problems over both the short and long run.

Streamlining Medicaid and CHIP enrollment. The budget includes two proposals to cut red tape and enroll more eligible children and adults in Medicaid and CHIP. The first would make permanent Express Lane Eligibility, a state option expiring at the end of fiscal year 2017 that allows states to use information they’ve already collected and verified to establish people’s eligibility in other programs such as SNAP (food stamps) to enroll eligible children in Medicaid and CHIP. Research shows the option boosts enrollment and lowers states’ administrative costs. The second proposal would allow states to give adults up to 12 months of continuous Medicaid coverage before needing to reapply, as states can already do for children. This would avoid unnecessary paperwork and coverage gaps as people’s income fluctuates over the course of the year, which now requires them to switch back and forth between Medicaid and the health insurance marketplaces.

Medicaid payment boost for primary care. The budget reinstates health reform’s temporary boost in Medicaid payments for primary care services (which expired at the end of 2014) and extends it to more types of primary care providers. Health reform required states to raise Medicaid payment rates for certain primary care services to Medicare payment levels in 2013 and 2014, helping ensure that current and newly eligible Medicaid beneficiaries had access to care; the federal government picked up all of the added cost. Research shows that the increase encouraged providers to accept new Medicaid patients. Restoring this payment bump through 2017 would help bring more primary care providers into Medicaid and retain existing providers.